Another Audacious Telecom Deal Bites the Dust

Innovative data networker LightSquared still wants to fight for its future, but avowed business partner Sprint Nextel (NYSE: S  ) already hung up on that conversation.

Just days after LightSquared hired an all-star team of legal experts, Sprint told the company to look for new partners. Sprint has extended the deadline for FCC approval of LightSquared's network several times. Patience is a virtue, but there's no point in overdoing it.

The original 15-year agreement came with some contingencies, allowing Sprint to pull out by returning $65 million of LightSquared's unused network-building funds. While hardly pocket change, that cost pales next to the $9 billion Sprint planned to pay for the hybrid tower-and-satellite network. It's also cheap in comparison to the $6.5 billion of cash and radio licenses AT&T (NYSE: T  ) had to cough up when its proposed merger with T-Mobile USA died.

To steal a line from Jerry Maguire, nobody said that winning was cheap. Especially not in the smartphone market, where AT&T and Verizon (NYSE: VZ  ) set the rules while smaller players like Sprint struggle to survive.

So Sprint has found a whole new level of commitment to Clearwire (Nasdaq: CLWR  ) , which runs a more conventional 4G LTE data network on cell phone towers nationwide. The LightSquared deal was a thinly veiled attempt to become the biggest name in rural mobility. Covering the countryside in tower-based cell signals of high quality is not a cheap project. Just ask Alaska Communications Systems (Nasdaq: ALSK  ) , which put the brakes on its superb dividends just to catch up on its 4G build-out costs in 2012.

Maybe LightSquared can regroup and just sell a satellite-bound solution to Sprint and others, forgetting all about the controversial land-based component and its impact on GPS signals. It certainly sounds better than giving up the ghost altogether. I'm just glad I don't have a financial stake in LightSquared's survival at this point.

Mobile networking is a cutthroat market, but you can play the smartphone and tablet boom without choosing sides. Check out these three hidden winners of the iPhone, iPad, and Android revolution.

Fool contributor Anders Bylund holds no position in any of the companies mentioned. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check out Anders' holdings and bio, or follow him on Twitter and Google+. We have a disclosure policy.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1822341, ~/Articles/ArticleHandler.aspx, 8/20/2014 1:42:50 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement